U.S. Set for 'Triple Dip' in Home Prices

Fiserv (Stock Quote: FISV) just issued new data that show the U.S. housing market had better brace for another “triple-dip” decline in home prices.

Fiserv says that U.S. home prices will fall by 3.6% by June 2012, dragged down by a lingering unemployment problem, more foreclosures, and more Americans reluctant to buy homes in an uncertain real estate market.

The numbers aren’t that far from the recently released S&P/Case-Shiller Housing Index, which had U.S. home prices off 3.8% from August 2010 to August 2011.

The good news from the Case-Shiller data is that the trajectory of home prices appears to be leveling off, albeit modestly. The index reports that the 3.8% number is at least lower than the 4.1% year-to-year decline seen in July.

But the Fiserv numbers are more forward-looking, reaching out nine months well into 2012, which might give pause to homebuyers who want to buy now but may be willing to wait until home prices decline further – that is, if Fiserv is on the money with its 2012 estimates.

If the numbers are right, Fiserv estimates that U.S home prices will have fallen a whopping 35% from highs in the spring of 2006. Case-Shiller isn’t far behind, calculating that the past five years haven’t been kind to U.S. homeowners – not by a long shot.

"Measured from their June/July 2006 peaks through August 2011, the peak-to-current declines for the 10-city Composite and 20-city Composite are -30.9% and -30.8%, respectively," the S&P/Case-Shiller report stated.

So why the continued slowdown in home values?

Economists say that foreclosures are gathering strength again, after a slowdown while government regulators studied mortgage servicers’ home loan documentation process. Now that issue is largely resolved, and banks and lenders are once again foreclosing with gusto, sending more properties into a housing glut, and keeping home values down in the process.

The Fiserv data also points to other lagging economic indicators that help explain the continuing decline in home prices. In addition to the foreclosure issue, Fiserv adds, “sustained high unemployment and consumers' fear of taking on a major purchase like a mortgage loan" are downward drivers of residential home prices.

Fiserv also takes a longer-term estimate, noting that it expects home prices to finally start climbing by 2.4% from June 2012 through June 2013. Some regions should see home values rise even sooner than that, with 31 of 385 urban markets expected to see double-digit gains, and 71 markets expected to see an increase of 5% or more in home prices.

Smaller cities in Nevada, California and Florida are at the top of the list in those categories, Fiserv says.

For right now, home prices are still fragile, and expected to fall through the first half of 2012. If there’s a light at the end of the tunnel, homeowners have to be wondering why it remains so dim, and when it will grow brighter.